Lots of articles make this mistake -- they use the distribution of Bitcoin in wallets to determine the wealth distribution. This is extremely flawed not only because many miners hold their coins over multiple wallets (e.g. Satoshi) but moreso because exchange wallets are counted as single individuals.
Yes. And tons of articles and people are also making the mistake of thinking the sites tracking BTC transfers are actually transactions either purchasing or selling Bitcoin for cash. In reality, they are mostly internal transfers.
Anybody that has that kind of gain in the last few years from Bitcoin et al., would be nuts to not be cashing some of it out. More and more headlines by the day are sounding like a rehash of the dotcom bubble type insanity that occurred right before the crash. The lifestyle difference between $300m and $800m, or $1b and $6b, is not meaningful enough to risk giving 50% or 97% of it all back in a serious crypto crash.
In my opinion, the crypto boom will follow a nearly identical path to most bubbles that involve new, valuable technology. The bust will last for several years, most coins & ICOs will end up entirely worthless, a select few will remain very valuable, and the new technology services (that touch the real economy) built on top of blockchain in the following 10-20 years is where all the lasting wealth & impact will be made (trillions of dollars in new wealth globally, due to productivity improvements from new services/products, affecting most aspects of commerce & economy eventually). Most of the bubble wealth created in the present crypto mania, will never get cashed out (can never be cashed out), it'll die in the fire as with all bubbles. It's the classic over-done splurge that you see with all new technology (try every possible permutation, along with 37 copies of each), it simply means 99% of the coins will vaporize.
That's exactly what was claimed about the Internet bubble, over and over and over again in every bubble touting story about how it was "the new economy" and "different this time."
Besides the Internet did in fact involve a once in a generation economic paradigm shift. Just ask China, $6+ trillion in annual online payment processing / exchange flow. Their entire economic output was $800 billion circa 1998. Entire vast industries have been and are being reshaped by the Internet. Crypto-currencies can never reach the paradigm shift scale of the Internet, they're sub to it.
There are in fact lots of other examples. The automobile didn't generate an economic paradigm shift? It sure did, massively; amounting to reshaping the entire way people live, travel, and how and where things are built, how commerce is transported & transacted, how food is distributed, and so on. Was there a huge automobile bubble? There sure was.
Paradigm shifts do not banish economic fundamentals / realities, they're ultimately beholden to them, which is what inevitably destroys the bubbles.
There were at one time hundreds of automobile companies. Most of which were outright scams.
Much like the dot com bubble the scams went bankrupt and lost every dime, some got bought out for pennies on the dollar, and then there were a dozen or so survivors that actually created long-term wealth.
Don't forget the housing bubble. The first time it occurred to me that housing was a bubble was when I heard the economist for the National Association of Realtors say on the radio this time was different because of a paradigm shift. It reminded me of what I had heard during the dot-com bubble.
It's not just a new form of exchange, it's a new way of storing and transfering ownership and value in an immutable way -even by the most powerful entities of the world. For the first time in history the separation of state and economy is something conceivable. That's not only an economic paradigm shift, when materialised (and I firmly believe it will, because it makes so much sense), it will affect practically every aspect of society.
Sigh, BTC fanboism sounds so much like 70s scammy cults, it’s annoying.
Folks, you’re so blind to the risks and obvious manipulations it’s heart wrenching, but the stupid dismissiveness of anything else — and the arrogant superiority complex that comes with it — makes me want to invest in popcorn.
What is this paradigm shift? Bitcoin is a terrible currency, is about as good a store of value as tulips and beanie babies (Actually, beanie babies are better - at least you can play with them.)
You may say blockchains are a paradigm shift (I don't believe that), but even if they are, there is absolutely no reason for why Bitcoin is the best blockchain that has, or will ever be created. If they are a critically important paradigm shift, then I can with 100% certainty say that bitcoin will be completely dead in the near future - much like Mintel vs Internet.
The current cryptocurrency bubble is very similar to the dot-com bubble: most altcoins are overvalued, similar to pet.com. At the same time Bitcoin is still undervalued, as it has a very good disciplined dev team behind it.
Remember the last frustration you had with software, hardware or your hobby? Imagine you can solve it for yourself and others just by throwing money on the problem. There is a saying, that the rich are just frustrated mariners, all they want is a larger boat. If you are in that category, then yes, your lifestyle difference won't be large with a $100m and $1b
If you're a billionaire you can just pay the fee to have your transaction in the next block. The network works perfectly for anyone willing to pay fees.
Selling a billion on exchanges without excessive slippage would be difficult, but perhaps not impossible considering that the daily volume is above 16 billion right now. Certainly something in the 10-100 million range would be pretty easy.
Daily volume of $16b according to what? The ledger? If coinbase moves 10,000 bitcoins to a different wallet, you see that as a transaction. If I move all my Bitcoin from coinbase to a private wallet then back to coinbase, you would see those as separate transactions on the ledger as well.
There is not $16b in daily liquidity in the BTC market right now.
Moving money from one pocket to the other over and over all day long is not a sign of liquidity.
No, I'm not talking about transactions on the blockchain. I'm talking about trading volume on exchanges. That $16B figure does sum up trading in all BTC currency pairs including altcoins. BTC/USD daily volume alone is around $2B. KRW, JPY and EUR also have significant volume. https://coinmarketcap.com/currencies/bitcoin
Easy? Which exchange right now will let you sell millions of dollars at once? My coinbase account is aged, well used and verified. And I think I can't sell more than $10k a week.
Coinbase is not a true exchange. It's more of a broker. Their exchange offering is called GDAX, and it supports daily withdrawal limits in the tens of millions of dollars for verified users (possibly higher, I don't know an upper limit). The initial limits are lower, but if you have the money and aren't doing anything illegal you can simply request higher limits. Also, deposits and trades are completely unlimited, so you can sell a billion now and withdraw later over time.
Other exchanges with high USD volume include Bitstamp and Gemini. Bitfinex is also an option if you trust them and live outside the US (I don't).
Coinbase has daily and monthly limits. And you have to build up to them.
You would either have to find a billion dollar buyer somewhere or somehow manage the logistics of selling to thousands and thousands of individual buyers.
> the approximately 1,000 people who hold an estimated 40 percent of all bitcoin, or an average of around $350 million each.
I've seen this statement over and over again for the last few months in various news outlets and blogs, but I'm having a hard time wrapping my head around this statement.
I understand these 1000 people are what are popularly known as the "Bitcoin Whales" but how did most of them come in possession of a vast majority of bitcoins?
Traditional FIAT currency, like USD for example first comes into circulation when the US Government prints it, and then slowly makes it was into the hands of individuals via contract payments, salary payments etc etc.
With Bitcoin, who was/is that central entity that distributed the original coins? And in exchange for what? How much does this anonymous 'Satoshi' individual own? Did he only write the specs and the blockchain stuff for bitcoins, or did he also create said bitcoins and then grant himself a bulk of the coins like how Charles Lee did with Litecoins?
I couldn't find an explanation for this -- i.e. how did the BitCoin Whales come to posses 40% of the Bitcoins between themselves - anywhere, no matter how much I google it. Anyone?
Some are miners. The others are early investors. All bitcoins were mined at some point, so they bought them from miners who cached out, or other investors who bought them from miners, etc. I don't think a significant number of them sold goods in exchange for their bitcoins.
All bitcoins are created from mining rewards. As the number of coins has increased (and more people started mining), the difficulty goes up and less coins are produced.
These 'whale' entities either ran mining operations early enough, or (more likely) took a huge bet on the direction this was going and decided to accumulate - like the Winklevoss twins did - by buying as many as they could from miners.
Also Hal Finney and others who helped in the beginning may have left sums of BTC behind (RIP). A personal anecdote, somewhat related: In the early days, I mined several blocks from the wallet itself, on an AMD Sempron or Duron, at about 800-900mhz. Even then, this took a few days and then weeks before eventually becoming impossible with the advent of mining pools and GPU mining arrays.
Speaking for myself only, some of us just lost or discarded them because they had no value, and mining them was more of an act of altruism, so while it was fun seeing the numbers go up, it was easy to lose track of a wallet. I don't think electrum seed phrases were around yet at that time, either, or I had no knowledge of them if they were.
I think people massively underestimate the number of Bitcoin which are forever lost. I’d put it at well over 50%, and the true market cap is much less than we think it is because of this. IMO “Satoshi” coins are part of this unrecoverable set, but of course I have no data to base that on, just a hunch.
A coin that vanishes unpredictably would be the worst sort of money. Ironically, under Gresham's Law, such a currency would dominate other forms of money because everyone would be in such a hurry to exchange it for goods before it disappeared.
Reasonable how? That's a $530T+ valuation at the current number of tokens, or about two times as much as the total global wealth according to Credit Suisse. [0]
Don't go there, I got rid of them through my own actions. This isn't some serendipitous disappearance, this is not a takeaway from my anecdote, and certainly not something that should be used to detract from the value of BTC.
This isn't coins that have turned to dust when you take them out of your wallet to spend - this is coins that have been lost overboard from a cruise ship in the middle of the ocean.
Gresham's Law technically applies to nonidentical versions of the same legal tender. That's not applicable to Bitcoin, because there is no material difference in the manufacture of individual Bitcoins, and nobody is forced to use or accept it.
But to think this through, maybe there would be three components to the dynamics of such a theory.
1) Bitcoin will continue to vanish as holders die, forget about their bitcoin, or lose access to their wallets.
2) Up until a certain point, this will cause the value of Bitcoin to increase, as reduction of the Bitcoin supply is deflationary. Those who recognize that this deflation is occurring will hang on to their Bitcoin, because of the expectation that their holdings will appreciate in value.
3) After a certain point, people will realize that much of the total Bitcoin capitalization has been lost/forgotten, and they will be in a hurry to use Bitcoin (sell it for goods) before their holdings become too large in proportion to the total non-lost capitalization still in circulation. Proportionally large holdings are worthless if they cannot be liquidated or used. (Similarly, imagine a currency with two holders, half each; neither is incentivized to accept large transactions because if one sells out, the other is left owning the entire currency by himself.)
I predict that people will realize that Bitcoin is incapable of robustly facilitating a global amount of transactions without centralization in banks/hubs/wallets/exchanges, thus defeating its stated advantage of immediacy and anonymity, far faster than individual coins fall out of use.
I think anyone panicked right now over the loss of their BTC because of a lost key, broken HDD, forgotten pwd, or the BTC just it isn't there anymore for reasons unknown-- those people will never feel secure holding BTC again in any form. The psychology of loss is powerful, and grown-ups just don't put their life savings in insecure stores of value.
The value of BTC is part scarcity and part network effect. In a rational world (what we usually get in the long term) disappearing BTC would have an impact on the network effect. Interestingly, Gresham's Law suggests it would be a positive effect. A likelihood that wealth will be destroyed at death-- I would think that would deter adoption.
Funny that you mention that because people in many countries panic daily over the loss of their life savings in banks or government-backed hard currency. They have seen them vanish to a scale that can't even compare due to corruption, politics, incompetence, or reasons unknown.
> incapable of robustly facilitating a global amount of transactions without centralization in banks/hubs/wallets/exchanges
Banks/(3rd party) Wallets/(3rd party) exchanges is centralisation.
Lightning network hubs for example are not -and could scale much better, with less friction, than any transaction systems that we currently have. But plenty of things are going on, if it's not that it will be something else, it's only a matter of time.
People were spending tens of thousands of Bitcoins on stuff like pizza in the early days and there were significantly fewer Bitcoins back then. That's hundreds of millions of dollars today.
So all some of them had to do is keep them around. Others just bought them later on. Winklevoss twins put $100 million in Bitcoin years ago. I imagine many rich Chinese people wanting to evade money transferring rules in China did, too.
Wow. Didn't know that. So if he/she tried to cash out, then the identity would be out right, since he/she would be attempting to deposit the cash equivalent ( FIAT ?) into a real bank account?
Given the amount of secrecy Satoshi has demonstrated before it'd be shocking enough to see the coins move much less move to a well known address (e.g. coinbase).
There’s no way to tell the entire holdings of Satoshi though so it’s quite possible she/he had other wallets and has made bank. Mining was easy for quite some time and once people were selling lots of coins it’s possible Satoshi was a buyer (if for no other reason than to help kickstart the market for them).
This assumes they only mined into a single wallet. They could have easily switched personas as a normal early bitcoin enthusiast. I would suspect that if you wanted to track the real Satoshi(s) down, you would start with a list of the earliest adopters. I would also look at people that maybe weren't the most vocal as they probably wouldn't have wanted to bring attention to themselves. Maybe they really did just completely step back though.
Satoshi could have also mined later when difficulty was still not so bad and have other wallets people don't know about. So in theory Satoshi could have cashed out couple millions from his later wallets already and be living on some island in Caribbean.
It's definitely conceivable that he/she would not be so greedy as to touch the origin coins. It's enough to cash out couple millions from later wallets, buy some nice house near beach and live very comfortably.
Of course, I still think much more likely scenario is that Satoshi is dead or lost his/her private key.
It's very unlikely that he/they are either dead or in prison. Satoshi went silent for over a year, and then only came out and sent a single message when Dorian Nakamoto was pegged as Satoshi.
The media always tells the story this way: Joe Person traded eg 10,000 bitcoins for some pizza, in what is believed to be the first commercial transaction.
You know what they always miss in the story? Joe Person did that same deal several times, which you can see by reading the forum thread that still exists. Joe Person missed out on a billion dollars in Bitcoin value in exchange for maybe a dozen pizzas.
How did Joe Person get tens of thousands of bitcoins? That's how easy it was to mine back then.
Wait 2, 10 or 20 years and a pizza may look like a good value again. Think of it like the Hindenburg or the Wright biplane. Yes, it works and demonstrates a principle. That doesn't mean it will keep flying.
(1) The asset not the product is the thing being marketed (i.e. live alpacas, not fiber)
(2) investors have unrealistic expectations (alpaca fiber would replace wool, despite the lack of infrastructure; and besides the fact that people don’t really wear that much wool)
(3) information is controlled through industry sources (most of the information the researchers were able to dig up was put out by breeding associations)
You and parent poster make for a wise conversation. The closing sentence — telltale signs of a speculative bubble — can be read for BTC, one to one. Brilliant!
"In turn, financial investors get a secure, levered exposure to bitcoin that is not hostage to an unproven price-setting and without the expense of setting up a system to hold physical bitcoin."
I realize that securely holding bitcoin at scale isn't completely trivial, but isn't part of the value of bitcoin supposed to be that these costs are not large? Especially the use of the term, "physical bitcoin," seems a bit ridiculous.
Bitcoin security is partly based on public-key crypto. So anything you would do to secure a private key, you can use to secure your BTC from being stolen. Encrypt it with a passphrase, or store it on a thumb drive and lock it in a safe, or print it out on paper and put it in your wallet to be scanned (e.g. in QR code format) only when needed, or even store it in a tamper-proof hardware dongle.
Plus the programmability features of Bitcoin open up some other interesting possibilities -such as setup multi-signature wallets each in a different physical location.
I think once people start cashing out a large amount of bitcoin, the value will drop (due to additional supply). I'm afraid with all the latest hype and new investors, a drop off would trigger a massive selloff.
It wouldn't be the first time in the history of Bitcoin and it might actually be a good thing. People should start seeing Bitcoin as something else than an easy profit highway.
The talk of cryptocurrencies are on a so wrong place. What value have been created? Some people hoarded money and waited and became rich, is this news? Value system of society is so distorted. I understand the value when it is used as a means to exchange value but how this is now different than Ponzi scheme?
78 comments
[ 3.1 ms ] story [ 124 ms ] threadIn my opinion, the crypto boom will follow a nearly identical path to most bubbles that involve new, valuable technology. The bust will last for several years, most coins & ICOs will end up entirely worthless, a select few will remain very valuable, and the new technology services (that touch the real economy) built on top of blockchain in the following 10-20 years is where all the lasting wealth & impact will be made (trillions of dollars in new wealth globally, due to productivity improvements from new services/products, affecting most aspects of commerce & economy eventually). Most of the bubble wealth created in the present crypto mania, will never get cashed out (can never be cashed out), it'll die in the fire as with all bubbles. It's the classic over-done splurge that you see with all new technology (try every possible permutation, along with 37 copies of each), it simply means 99% of the coins will vaporize.
Besides the Internet did in fact involve a once in a generation economic paradigm shift. Just ask China, $6+ trillion in annual online payment processing / exchange flow. Their entire economic output was $800 billion circa 1998. Entire vast industries have been and are being reshaped by the Internet. Crypto-currencies can never reach the paradigm shift scale of the Internet, they're sub to it.
There are in fact lots of other examples. The automobile didn't generate an economic paradigm shift? It sure did, massively; amounting to reshaping the entire way people live, travel, and how and where things are built, how commerce is transported & transacted, how food is distributed, and so on. Was there a huge automobile bubble? There sure was.
Paradigm shifts do not banish economic fundamentals / realities, they're ultimately beholden to them, which is what inevitably destroys the bubbles.
I'm not familiar with a past (or any) automobile bubble. Are you saying you think we're in now?
I've heard this theory before, but I don't know what would cause it to pop, or how one could protect oneself (if that's even needed) from it popping.
Much like the dot com bubble the scams went bankrupt and lost every dime, some got bought out for pennies on the dollar, and then there were a dozen or so survivors that actually created long-term wealth.
One of the classic warning signs of a bubble is people saying "but this time, it's different." Particularly in response to claims of a bubble.
Then I saw this map and was convinced:
http://graphics8.nytimes.com/images/2005/06/15/business/arm3...
http://www.jstor.org/stable/2338493?seq=1#page_scan_tab_cont...
Now the Star Trek replicator.. that would be a paradigm shift.
If you didn't: What goods are purchasable using crypto in your area?
Using "crypto" as a term for any crypto currency, to avoid "Bitcoin is crypto gold" replies.
Folks, you’re so blind to the risks and obvious manipulations it’s heart wrenching, but the stupid dismissiveness of anything else — and the arrogant superiority complex that comes with it — makes me want to invest in popcorn.
You may say blockchains are a paradigm shift (I don't believe that), but even if they are, there is absolutely no reason for why Bitcoin is the best blockchain that has, or will ever be created. If they are a critically important paradigm shift, then I can with 100% certainty say that bitcoin will be completely dead in the near future - much like Mintel vs Internet.
Rockets (Bezos, Musk)
Curing aging (Ellison, Bezos, Page, Brin, Pineapple Fund)
Curing malaria (Gates)
Or something on a lesser scale:
Seed funding to startups (Graham)
App to display wind for kitesurfing (Lukacovic)
Remember the last frustration you had with software, hardware or your hobby? Imagine you can solve it for yourself and others just by throwing money on the problem. There is a saying, that the rich are just frustrated mariners, all they want is a larger boat. If you are in that category, then yes, your lifestyle difference won't be large with a $100m and $1b
Selling a billion on exchanges without excessive slippage would be difficult, but perhaps not impossible considering that the daily volume is above 16 billion right now. Certainly something in the 10-100 million range would be pretty easy.
There is not $16b in daily liquidity in the BTC market right now.
Moving money from one pocket to the other over and over all day long is not a sign of liquidity.
Cumberland
Goldman’s late to the party trade desk
Heck, even Circle.com is doing otc trades
Most of these have a minimum bitcoin order size of 100 btc
Coinbase is a tool for the naive.
Other exchanges with high USD volume include Bitstamp and Gemini. Bitfinex is also an option if you trust them and live outside the US (I don't).
Coinbase has daily and monthly limits. And you have to build up to them.
You would either have to find a billion dollar buyer somewhere or somehow manage the logistics of selling to thousands and thousands of individual buyers.
I've seen this statement over and over again for the last few months in various news outlets and blogs, but I'm having a hard time wrapping my head around this statement.
I understand these 1000 people are what are popularly known as the "Bitcoin Whales" but how did most of them come in possession of a vast majority of bitcoins?
Traditional FIAT currency, like USD for example first comes into circulation when the US Government prints it, and then slowly makes it was into the hands of individuals via contract payments, salary payments etc etc.
With Bitcoin, who was/is that central entity that distributed the original coins? And in exchange for what? How much does this anonymous 'Satoshi' individual own? Did he only write the specs and the blockchain stuff for bitcoins, or did he also create said bitcoins and then grant himself a bulk of the coins like how Charles Lee did with Litecoins?
I couldn't find an explanation for this -- i.e. how did the BitCoin Whales come to posses 40% of the Bitcoins between themselves - anywhere, no matter how much I google it. Anyone?
These 'whale' entities either ran mining operations early enough, or (more likely) took a huge bet on the direction this was going and decided to accumulate - like the Winklevoss twins did - by buying as many as they could from miners.
Satoshi did not pre-mine, I believe. So, if you read his announcement, and started mining right away, you'd be as rich as him.
[0] - https://en.m.wikipedia.org/wiki/Satoshi_Nakamoto
Speaking for myself only, some of us just lost or discarded them because they had no value, and mining them was more of an act of altruism, so while it was fun seeing the numbers go up, it was easy to lose track of a wallet. I don't think electrum seed phrases were around yet at that time, either, or I had no knowledge of them if they were.
At the current bitcoin price of $14591, a satoshi is worth $0.0001459190.
The maximimum amount of minable bitcoins is 21 million.
Current global gold supply is ~ $7 trillion
If bitcoin completely replaces gold, bitcoins will be trading for about $333,333.33, so a satoshi would be worth ~$0.0033.
People use quarters for mostly everything now, so this is again quite reasonable.
[0] https://www.credit-suisse.com/corporate/en/research/research...
But that's not necessarily impossible to attain. If BTC wins and the world switches, the resulting bubble might be that big.
But to think this through, maybe there would be three components to the dynamics of such a theory.
1) Bitcoin will continue to vanish as holders die, forget about their bitcoin, or lose access to their wallets.
2) Up until a certain point, this will cause the value of Bitcoin to increase, as reduction of the Bitcoin supply is deflationary. Those who recognize that this deflation is occurring will hang on to their Bitcoin, because of the expectation that their holdings will appreciate in value.
3) After a certain point, people will realize that much of the total Bitcoin capitalization has been lost/forgotten, and they will be in a hurry to use Bitcoin (sell it for goods) before their holdings become too large in proportion to the total non-lost capitalization still in circulation. Proportionally large holdings are worthless if they cannot be liquidated or used. (Similarly, imagine a currency with two holders, half each; neither is incentivized to accept large transactions because if one sells out, the other is left owning the entire currency by himself.)
I predict that people will realize that Bitcoin is incapable of robustly facilitating a global amount of transactions without centralization in banks/hubs/wallets/exchanges, thus defeating its stated advantage of immediacy and anonymity, far faster than individual coins fall out of use.
The value of BTC is part scarcity and part network effect. In a rational world (what we usually get in the long term) disappearing BTC would have an impact on the network effect. Interestingly, Gresham's Law suggests it would be a positive effect. A likelihood that wealth will be destroyed at death-- I would think that would deter adoption.
The psychology of loss is powerful indeed
Banks/(3rd party) Wallets/(3rd party) exchanges is centralisation.
Lightning network hubs for example are not -and could scale much better, with less friction, than any transaction systems that we currently have. But plenty of things are going on, if it's not that it will be something else, it's only a matter of time.
So all some of them had to do is keep them around. Others just bought them later on. Winklevoss twins put $100 million in Bitcoin years ago. I imagine many rich Chinese people wanting to evade money transferring rules in China did, too.
Satoshi has a million Bitcoins.
Wow. Didn't know that. So if he/she tried to cash out, then the identity would be out right, since he/she would be attempting to deposit the cash equivalent ( FIAT ?) into a real bank account?
So uh, not anymore dammit,
It's definitely conceivable that he/she would not be so greedy as to touch the origin coins. It's enough to cash out couple millions from later wallets, buy some nice house near beach and live very comfortably.
Of course, I still think much more likely scenario is that Satoshi is dead or lost his/her private key.
The media always tells the story this way: Joe Person traded eg 10,000 bitcoins for some pizza, in what is believed to be the first commercial transaction.
You know what they always miss in the story? Joe Person did that same deal several times, which you can see by reading the forum thread that still exists. Joe Person missed out on a billion dollars in Bitcoin value in exchange for maybe a dozen pizzas.
How did Joe Person get tens of thousands of bitcoins? That's how easy it was to mine back then.
I'm pretty sure Alpaca socks were sold before that famous pizza.
https://priceonomics.com/when-the-great-alpaca-bubble-burst/
(1) The asset not the product is the thing being marketed (i.e. live alpacas, not fiber)
(2) investors have unrealistic expectations (alpaca fiber would replace wool, despite the lack of infrastructure; and besides the fact that people don’t really wear that much wool)
(3) information is controlled through industry sources (most of the information the researchers were able to dig up was put out by breeding associations)
I realize that securely holding bitcoin at scale isn't completely trivial, but isn't part of the value of bitcoin supposed to be that these costs are not large? Especially the use of the term, "physical bitcoin," seems a bit ridiculous.